Retirement: Introducing the MyRA

Savers will soon have a new option, said Damian Paletta and Anne Tergesen in The Wall Street Journal. During his State of the Union address last week, President Barack Obama announced the creation of a retirement savings account called a MyRA, which he said “guarantees a decent return with no risk of losing what you put in.” The accounts would be structured much like Roth IRAs, but “the investments would be backed by the federal government.” MyRAs aren’t entirely new; “the proposal is similar to an idea Treasury officials have studied for several years.” But unlike many other proposals to bolster Americans’ retirement funds, this plan would be launched “through an executive action, meaning it wouldn’t need congressional approval.”

MyRAs could help millions, said Melanie Hicken in CNN.com. Though all workers with household income below $191,000 and direct-deposited paychecks will be able sign up, “the accounts are targeted at the millions of low- and middle-income Americans who don’t have access to employer-sponsored retirement plans.” Savers will invest after-tax dollars and be able to withdraw the money in retirement tax-free, but “the accounts will solely invest in government savings bonds,” which are insured by the federal government. Savers can withdraw their MyRA contributions at any time without penalty, and MyRAs will be “free of any fees.” But once the balance hits $15,000 or has been open for 30 years, MyRA accounts have to be rolled over into a Roth IRA.

This idea doesn’t “go far enough” to fix our broken retirement system, said John Wasik in Forbes.com. It’s no secret that Americans aren’t saving enough for retirement. Pensions “have become a rarity,” 401(k)s aren’t cutting it, and this new option doesn’t really help. “The problem isn’t that Americans don’t have enough ways to save for retirement—they have too many.” A better solution would be to “consolidate them and make the tax breaks uniform through credits.” Design a plan that everyone can opt in to, “regardless of where they work.”

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Or just switch to direct payments, said Hamilton Nolan in Gawker.com. Obama’s MyRA plan “is a way to get people to start saving, even if they can only save a little.” But it does nothing for workers who are living hand-to-mouth. “How are people supposed to save when they don’t make enough to live?” Why not simply increase government payments to the low-income retirees who need them the most? Encouraging workers to save by “expanding the pool of IRAs” is all very nice. “But the overwhelming problem is that many people are too poor to provide for themselves in retirement” in the first place.